Question

Jiz Saved Marcelino Co.'s March 31 inventory of raw materials is $90,000. Raw materials purchases in April are $520,000 and factory payroll cost in April is $386.000. Overhead costs incurred in April are: indirect materials, $54,000 indirect labor. $27,000; factory rent, $35,000; factory utilities, $20,000; and factory equipment depreciation, $54,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $665,000 cash in April Costs of the three jobs worked on in April follow. Job 386 Job 307 Job 388 $ 27,000 21,000 1,500 $ 37, eee 17,000 8,500 Balances on March 31 Direct materials Direct labor Applied overhead Costs during April Direct materials Direct labor Applied overhead Status on April 30 131,00 103,000 205,000 154, eee $110,000 102,800 ? Finished Finished (unsold) In process (sold) 4.1 Compute gross profit for April. Gross Profit 4.2 Show how to present the inventories on the April 30 balance sheet. Inventories Raw materials Work in process < Prev of 5 Next >

Answer 1

Workings: Calculation of Applies Overhead Cost for each Job: Given that Overheads are applied at the rate of 50% of direct labor cost. $ Job 306 103,000.00 $ 50.00% Job 307 154,000.00 $ 50.00% Job 308 102,000.00 50.00% Direct Labor Cost during April Overhead Application Rate Overhead Applied (Direct Labor Cost x Applied Rate) $ 51,500.00 $ 77,000.00 $ 51,000.00

4.1: Computation of Gross Profit for April: Calculation of Total Cost of Job 306: Beg. Direct Materials $ 27,000.00 Beg. Direct Labor $ 21,000.00 Applied Overhead $ 10,500.00 Beginning Work In Process $ 58,500.00 Add: Direct Materials used $ 131,000.00 Add: Direct Labor $ 103,000.00 Add: Applied Overhead ($103000 x 50%) 51,500.00 Total Cost of Job 306 $ 344,000.00 $ Only Job 306 is sold. So Cost of Goods Sold = Cost of Job 306 = $344000 Gross Profit = Sales - Cost of Goods Sold = $665000 - $344000 = $321,000.00 So, Gross Profit is $321,000.

4.2: Presentation of Inventories on April 30 Balance Sheet: Calculation of Raw Materials balance as on April 30: Raw Materials at Beginning $ 90,000.00 Purchases during April $ 520,000.00 Raw Materials available for Production $ 610,000.00 Less: Raw Materials issued: as Direct Materials ($131000+$205000+$110000) $ (446,000.00) as Indirect Materials $ (54,000.00 Raw Materials Balance on April 30 $ 110,000.00 Calculation of Work In Process balance on April 30: Job 306 is already completed and sold. So cost relating to Job 306 shall not included in Work In Process Inventory. Job 307 is Finished. Finished job's cost transferred to Finished Goods Inventory Account from Work In Process Inventory. So cost relating to Job 307 shall not be included in Work In Process balance. So, Work In Process balance on April 30 is as follows Direct Materials used for Job 308 $ 110,000.00 Direct Labor used for Job 308 $ 102,000.00 Applied Overhead Cost ($102000 x 50%) $ 51,000.00 Work In Process Balance as on April 30 $ 263,000.00

$ $ Calculation of Finished Goods Inventory on April 30: Only Job 307 is finished and not yet sold that means still in finished goods inventory. So, Finished goods Inventory as on April 30 is as follows Beginning Direct Materials bal. for Job 307 37,000.00 Beginning Direct Labor bal. for Job 307 17,000.00 Beginning Factory Overhead bal. for Job 307 $ 8,500.00 Direct Materials used for Job 307 $ 205,000.00 Direct Labor used for Job 307 $ 154,000.00 Applied Overhead Cost ($154000 x 50%) $ 77,000.00 Finished Goods Inventory Balance as on April 30 $ 498,500.00 So, Presentation of Ending Inventories on Balance Sheet as on April 30: Inventories Raw Materials Work In Process Finished Goods $ $ $ 110,000.00 263,000.00 498,500.00